Legality of Salary Deductions for Tardiness and Absences in the Philippines (A comprehensive practitioner-level guide as of 3 July 2025)
1. Governing Principles
| Source | Key Provision | Practical Effect |
|---|---|---|
| 1987 Constitution – Art. XIII §3 | State shall “afford full protection to labor” and guarantee workers a “just share in the fruits of production.” | All wage policies, including deductions, must favor labor when in doubt. |
| Labor Code of the Philippines (PD 442, as amended) | Art. 94 & 97 define basic wage entitlements; Art. 100 bars elimination or diminution of benefits; Arts. 113-116 regulate and restrict wage deductions. | Deductions are never the employer’s unilateral prerogative; they must fit the narrow grounds spelled out by law. |
| Omnibus Rules Implementing the Labor Code – Book III, Rule VIII, §10 | Reiterates statutory grounds for deductions and bars any form not expressly allowed or consented to in writing. | Administrative fines or “penalties” for tardiness are invalid unless they qualify under Art. 113. |
| DOLE Department Orders & Labor Advisories – esp. DO 19-03, DO 118-12, LA-01-04 | Expound the “no work, no pay” doctrine and clarify record-keeping/time-keeping rules. | Provide granular computation matrices and impose record-keeping duties on employers. |
| Jurisprudence (selected) | Auto Bus Transport v. Bautista (G.R. 156367, 23 Aug 2007); Coca-Cola Bottlers v. Agito (G.R. 179546, 13 Feb 2009); RCPI v. Lopez (G.R. 164349, 17 Apr 2009). | Supreme Court consistently upholds deduction of wages only for the actual time not worked; punitive fines struck down. |
2. The “No Work, No Pay” Rule
- Core concept – Wages correspond to time actually worked.
- Scope – Applies to tardiness, undertime, full-day absences, and work stoppage not attributable to the employer.
- Statutory exceptions – Paid regular holidays (Art. 94), service-incentive leave (Art. 95), maternity/paternity leave (special laws), and leaves under a CBA or company policy.
Bottom line: Deducting the monetary equivalent of unworked time is lawful; anything beyond that—e.g., a ₱100 “late fee”—is generally illegal.
3. Statutory Bases for Lawful Deductions
| Labor Code Art. 113 Ground | Typical Examples | Requisites |
|---|---|---|
| a. Insurance premiums or union dues | SSS, PhilHealth, Pag-IBIG employee share; authorized union dues | Employer is merely a withholding agent. |
| b. Court or NLRC orders | Garnishment for child support, execution of judgment | Must cite the specific writ/order. |
| c. Employee-written authority | Company loans, gadget amortization, salary advances | Must be voluntary, clear, and informed. |
| d. Other deductions allowed by law | Absences, tardiness, undertime under “no work, no pay” principle | Strictly limited to proportional wage loss. |
Articles 115-116 criminalize secret or forced rebates and any device to withhold lawful wages.
4. Tardiness: Computation & Pitfalls
Hourly-paid vs Salaried (“monthly”) employees
- Hourly/Daily paid: Deduct the exact minutes/hours multiplied by the hourly rate.
- Monthly-paid: Convert the monthly salary to an hourly equivalent:
$$ \text{Hourly Rate} = \frac{\text{Monthly Rate}}{ \text{Working Days per Month} \times 8 } $$
Rounding rules
- Common practice is to round to the nearest 6-minute or 15-minute block, provided it is declared in writing and applied uniformly.
- Rounding that systemically favors the employer (e.g., every 1-minute late = 1 hour deduction) violates Art. 100’s non-diminution rule.
Time-keeping
- Biometrics, swipe cards, or logbooks must comply with Republic Act 10173 (Data Privacy Act) and be preserved for at least 3 years (DOLE Visitorial Power Rules).
5. Absences and Leave Credits
| Scenario | Salary Impact |
|---|---|
| Absence with available leave credit | Paid leave; no deduction. |
| Absence without leave credit & no CBA/company paid-leave benefit | Deduct full day’s wage and exclude the day from 13th-month computation (per PD 851 Implementing Rules, §2(c)). |
| Medical leave beyond SSS sickness benefit | Employer may treat as leave without pay after exhausting credits. |
| Forced leave (employer-initiated suspension of work) | If due to employer fault (e.g., machine breakdown from poor maintenance), wages must be paid. If due to fortuitous events (e.g., typhoon disrupting operations) “no work, no pay” applies unless company policy/CBA provides otherwise (see Oriental Port v. NLRC, G.R. 103238, 28 Feb 1996). |
6. Prohibited or Questionable Practices
| Practice | Why Illegal |
|---|---|
| Flat “late fees” or penalties charged in addition to wage-equivalent reduction | Not a statutory ground under Art. 113; considered an unlawful fine. |
| Deducting premiums for undertime when employee worked beyond 8 hrs another day (“offsetting”) | Offset schemes must be mutually agreed in writing; otherwise employer is obligated to pay OT on excess days without offsetting prior undertime. |
| Taking absence/tardiness deductions from service charges or tips (in hospitality) | Service charges belong 100 % to covered employees under RA 11360; management can only deduct mandated taxes and contributions. |
| Applying absences/tardiness penalties retroactively (after payroll has closed) | Violates Art. 114 (wage payment directly to employee without delay) and due-process requirement for changes in pay. |
| Deductions that reduce take-home pay below the Regional Minimum Wage | Absolute statutory floor; employer must shoulder the excess deduction or treat time off as leave with pay. |
7. Interaction with Benefits & Statutory Contributions
- 13th-Month Pay – Computed on “basic salary earned” within the calendar year; days not paid due to absences/tardiness reduce the divisor.
- SSS, PhilHealth, Pag-IBIG – Contributions are still due as long as the employee remains on the payroll for the month; if no compensation is payable (e.g., leave without pay for entire month), report the employee as “No earnings” but do not retro-deduct arrears from future salaries without written consent beyond the usual employee share.
- Withholding Tax – Deductible earnings post-absence are the tax base; significant unpaid absences may push the employee into a lower tax bracket, requiring payroll system recalibration.
8. Due-Process Requirements in Implementation
- Consultation & Publication – Company policies on timekeeping and deductions must be promulgated in writing, explained to employees, and posted in conspicuous areas (Art. 292[formerly 277] on employer’s obligation to inform).
- Uniform Application – Discriminatory enforcement exposes employers to claims for constructive dismissal or unfair labor practice.
- Disciplinary Measures – Chronic tardiness or absenteeism should be dealt with through the twin-notice rule (notice to explain + notice of decision) rather than monetary penalties.
- Documentation – Employers bear the burden of proof in wage claims; keep daily time records (DTRs), payroll registers, leave forms, and written authorizations.
9. Remedies & Penalties for Illegal Deductions
| Avenue | Relief |
|---|---|
| DOLE Regional Office – Routine Inspection | Labor Inspectors may issue Compliance Orders requiring refund of illegal deductions plus interest. |
| Single-Entry Approach (SEnA) | 30-day amicable settlement proceedings; common for individual wage disputes < ₱5 million. |
| NLRC/NLRC RAB | Money claims, moral/exemplary damages, attorney’s fees; prescriptive period: 3 years from accrual (Art. 306). |
| Criminal Prosecution under Arts. 303-305 | Fine of ₱1,000-10,000 and/or imprisonment of ≤ 3 years for willful unlawful deductions. |
| Corporate & Officer Liability | Responsible officers may be held solidarity liable if they actively participated or were negligent in stopping the violation (see People v. Ong, CA-G.R. CR-No. 27734, 10 Mar 2014). |
10. Best-Practice Checklist for Employers (2025 Edition)
- Codify a clear attendance and time-correction policy; include grace periods, rounding rules, and approval flow.
- Automate timekeeping; reconcile biometrics with payroll software to avoid manual errors that could amount to illegal deductions.
- Audit deductions quarterly; generate variance reports vs statutory wage floors.
- Train HR and payroll personnel on DOLE issuances (last major update: DOLE Labor Advisory 06-24 on flexible work).
- Communicate policy updates and secure fresh written consent for any change affecting take-home pay.
11. Practical Tips for Employees
- Review payslips: Verify deduction line items; ask HR for breakdown if net pay seems low.
- Use leave credits strategically: File leave rather than incur unpaid absence.
- File grievances promptly: The 3-year prescriptive period runs from the date each illegal deduction was made.
- Document everything: Keep screenshots of time-in/out, emails requesting schedule corrections, and copies of pay statements.
12. Conclusion
Under Philippine labor law, an employer may deduct from wages only the actual value of time not worked due to tardiness or absence, and even then, only if the deduction fits squarely within Article 113 or another specific statute. Any additional “penalty,” round-up scheme, or unilateral policy that effectively diminishes wages beyond that proportional loss violates the Labor Code, constitutional protection to labor, and settled Supreme Court jurisprudence. Proper documentation, transparent policies, and consistent, fair application are essential to stay compliant—and to foster a workplace culture that treats both productivity and employee rights with equal respect.
This article is for informational purposes only and does not constitute legal advice. For specific situations, consult a Philippine labor-law attorney or the nearest DOLE Regional Office.